1 eFX Daily colour

1.1 FX Spot

1.1.1 Overview

(Feb-12) The market is closely watching the upcoming US CPI data at 15:30 SAST, with Jerome Powell signaling patience before further interest rate cuts, reflecting a strong economy. The Fed’s decision to keep its key policy rate unchanged in January suggests a cautious approach due to stalled progress in lowering inflation.

Meanwhile, the yen has rebounded to 153.65, just above the 200-day SMA, after its longest losing streak in over a month, amid concerns about Japan potentially being included in President Trump’s tariff plan.

Despite a recent rebound, the GBP continues to struggle with growth challenges, as the Bank of England halved its growth forecast to 0.75%, raising concerns about the labor market and inflation.

Gold’s rally has cooled slightly, which is seen as positive for its long-term outlook, with prices now lower for a second day. However, factors like a US-led trade war and official-sector buying suggest more upside for gold in the first half of the year. A move to $3000/oz is possible.

The rand has closed higher for the past two days and is not showing any signs of breaking below the 60-day SMA at 18.4510:

  • USDZAR trades at 18.51 with a signal to the topside.

Against the crosses:

  • EURZAR trades at 19.1747
  • GBPZAR trades at 23.0377

1.1.2 US

(Feb-06) US Jobless claims rose by 11K to 219K for the week ending February 1, staying relatively low. This level is consistent with pre-Covid figures, and private employment data indicates strong hiring in January. However, despite a calm January, several major companies have announced staff reductions for early February, hinting that the quiet period may be short-lived. USDZAR saw a slight rally after this to a low of 18.5740 on a 15min window.

(Feb-10) The dollar made some inroads on a daily basis, now trading 108.19 vs friday’s close of 108.09. Gold reached a record high of 2911.04$/oz due to President Donald Trump’s plan for steel and aluminum import tariffs, causing market disruption. Both the dollar and gold rose as demand for safe-haven assets increased amid the trade threats.

(Feb-11) The risk of further tariffs still has room to boost the dollar, which has been on a more bearish trend so far this year.

(Feb-12) The market is closely watching the upcoming US CPI data at 15:30 SAST.

1.1.3 SA

(Feb-10) There has been a fallout in relations between South Africa (SA) and the United States (US) following the introduction of the land expropriation act. Despite efforts by SA to clarify the act and provide accurate information to the US, the US has decided to halt all aid to SA while an investigation is ongoing. This decision has negatively impacted the Rand, which has lost some of its recent gains against the USD. The ZAR, which saw a low at 18.32 last Friday (07 Feb), and we opened today trading above 18.60, which is the ZAR under pressure region. Additionally, the African Growth and Opportunity Act (AGOA) is now at risk, further straining economic relations between the two countries.

  • ZAR has since made some gains, now trading +/- 18.50 lvls, signalling that the market is not yet too worried about these developments.

1.1.3.1 eFX Volumes

  • Overall volumes

(Feb-10) On Friday (07-Feb) we saw a turn from balance or net short USDZAR position to being net long USDZAR from clients. (*) This is not surprising given the recent growing tensions between SA and the US.

(Feb-11) Client remain net-long USDZAR despite the Rand showing some strength in yesterdays session.

(Feb-12) Continued pull-back on volumes, with yesterdays volumes being 15% lower than recent ADV.

  • Price to volumes

(Feb-10) Latest implied topside is 18.65 but we could go higher if there is not indication of a de-escalation between SA and the US.

(Feb-11) ZAR has stabilized at the 60-DMA of 18.4439.

(Feb-12) New implied topside at 18.6750 with associated bottom at 18.43. US CPI data is critical today, market seems convinced that we will end the day trading higher.

  • Liquidity hours across currency pairs
  • Currency positions

(Feb-10) Clients are now net-long USDZAR.

(Feb-11) We see continued net-long positions in ZAR.

1.1.3.2 USDZAR levels

(Feb-10) We saw the market gab in the early morning and ZAR gained some lost ground now trading at 18.41.

(Feb-11) From above, it is evident that the move lower in ZAR ended on the 6th of Feb, after that, we see ZAR range trading, without an significant move. This is a clear demonstration that the market is in a “wait and see” environment and is not ignoring the recent developments.

  • It would be premature for now to think ZAR will continue trading lower, range trading seems to be the most likely scenario and a tight range would be 18.60 - 18.35.
  • Volume weighted price for ZAR remains at 18.70.

(Feb-12) New implied topside at 18.6750 with associated bottom at 18.43. The Rand may struggle to make inroads against USD today, unless US CPI surprises. The market is expecting a general cool down in CPI and a confirmation of whether the proposed tariffs have an inflationary impact.

1.1.3.3 USDZAR spreads

(Feb-10) ZAR benefits from:

  • Gold hits all time high of 2911.04
  • JSE Top 40 also trades record high at 80139.26
  • DXY trades lower compared to open. We note however that USD has made some inroads given Friday’s close was 108.04 and we were trading higher than that today.

(Feb-11) ZAR ends the day slightly stronger at 18.44 vs open at 18.4486. Spreads continue to be elevated but today we saw some moderation, perhaps at the back of reduced volumes seen today.

(Feb-12) Near term Fed cut fades as inflation prints higher than expected. Core CPI, which excludes food and energy costs, increased 0.4% in January after a 0.2% advance in December, supporting the Federal Reserve’s cautious approach to lowering interest rates. Additionally, policymakers are waiting for more details on President Donald Trump’s policies, especially tariffs, which are raising consumer inflation expectations.

  • We saw USD strengthen across the board after CPI print.
    • We deduce that, given the Fed is holding interest rates while other central banks are cutting, this should be USD positive, ceteris paribus.

1.1.4 Key events this week:

  • US CPI, Wednesday
  • Fed Chair Jerome Powell testifies to House Financial Services panel, Wednesday
  • UK industrial production, GDP, Thursday
  • Germany CPI, Thursday
  • Eurozone industrial production, Thursday
  • Norges Bank Governor Ida Wolden Bache gives annual address, Thursday
  • Eurozone GDP, Friday

1.2 FX Volatility Update

1.2.1 Update

By Thuto Mukena - Institutional Sales Specialist (Feb-12)

  • Overview

Rand weakness persisted as uncertainty around Trump’s policy stance continued to weigh on sentiment. Locally, manufacturing production contracted by -1.2% y/y, slightly better than market consensus of -1.7%. Despite the continued sell-off in the currency , implied vols reflected a calmer road ahead—1-week USD/ZAR implied vol edged by 0.51 vol p.p lower, closing at 12.17%. This morning, the implied vol curve remains largely unchanged as markets await this afternoon’s U.S. CPI release, with consensus expecting no change at 2.9% y/y.

  • EM & G10

In G10, Powell’s speech in Washington reinforced the Fed’s cautious stance, emphasizing that the FOMC is in no rush to cut rates given continued resilience in the U.S. economy and labor market. A weaker dollar drove mixed spot reactions across markets, while 1-week implied vols broadly softened. USD/JPY 1-week implied vol led the declines, dropping 136bps, followed by AUD/USD (-111bps).

In EM, spot reactions were mixed as markets assessed the path ahead. However, 1-week implied vols broadly edged lower, except for USD/INR, which held firm—unsurprising given Trump’s proposed 25% tariffs on steel and aluminum imports, with India being a key trading partner for these resources.

1.3 Africa

1.3.1 Update

By sizwe Mfayela - Institutional Sales Specialist (Feb-12)

  • Ghana
    • President John Mahama has issued a directive to finance minister Cassiel Ato Forson to take steps to close the $156mio funding gap as a result of the freeze in USAID.
  • Kenya
    • Kenya’s cabinet approved Ksh 4.2trio ($32.65bio) spending for the 2025-2026 fiscal year. The East African nation is targeting a narrower budget deficit of 3.8% of GDP and expects economic growth to be 5.3% in the 2025-26 fiscal year.
  • Mozambique
    • Mozambique had its $256mio debt owed to Iran for oil supply written off yesterday. Mozambique owed $320.2mio to Iran and now has to repay the balance of $64mio over 15years, commencing 2029.
  • Nigeria
    • Nigeria looks to partner with India to accelerate its energy mix diversification plans. The West African country will also seek funding, technical assistance and advise from India on the implementation of its green energy plans.
  • Tanzania
    • Tanzania aims to finalise talks of a $42bio liquefied natural gas plant with investors by June. The Tanzanian government is negotiating terms to make the project more viable to the country and investors. The project aims to unlock 47.1trillion cubic feet of LNG deposits in the country.
  • Eurobonds
    • The weakness in SSA rates meant a softer tone for most of the session on ETF and street dealer selling, dealers were left long after the big volume which went through during the back half of last week. That said, spreads grinded tighter.
    • NGERIA saw good local demand for the belly of the curve and left it slightly better bought on the day. IVYCST/GHANA were the curves where paper was difficult to source.

1.3.2 Economic data

Economic data releases